Derivatives Trading Strategies

Paolo Tasca

In about 600 pages this technical handbook describes in detailed form more than 100 financial derivatives trading
strategies. The aim is to introduce the reader to the comprehension of functional mechanisms behind the exchanged-
traded financial futures and options trading strategies.
Both practitioners (eg traders) and students of finance are the users to who this “ready to use” handbook has
been written.
Joining together a constant scientific strictness with a simple language, the contents are understandable by
everyone with a basic finance training. The First part is an helpful introduction which, step by step will guide the reader
toward the world of derivatives market. Since every trading strategy is intimately related to the features of the adopted
contracts, the book examines the most updated trading strategies used by professional traders in the industry with clear
practical examples referred to Italian Derivative Market (IDEM) contracts. Basically: stock futures/option and index
futures/options.
In the first general part named “Financial Derivatives”, the book examines the characteristic of equity-index
futures and options contracts, the different pricing methodologies and the features of options’ Greeks..
The second part named “Futures Trading Strategies”, begins describing the simplest directional futures trading
strategies. Later on, we will move to analyze the relative value trading strategies and for ending the synthetic futures
positions.
The Third part, “Options Trading Strategies” starts describing the so called ‘simple option strategies’, to move
later towards the mechanisms behind the bullish strategies, the bearish strategies, the delta neutral strategies, the
diagonal combinations and the synthetic option positions.
In the Fourth part, “Derivatives Markets and Financial Systemic Crises” we end up with a review of the
heterogeneous and controversial opinions about the pros and cons of derivatives market and speculation in undermining
the stability of financial markets.
The handbook is equipped with STAROPTION©. This software implements a locked-trade. An arbitrage
strategy that selecting in real time among about 900 options on the same underlying, crosses match together the prices
of four options (1 long call + 1 long put + 1 short call + 1 short put) with the purpose to replicate a synthetic long futures
position and a synthetic short future position on stock-indexes. Developed in VBasic, STAROPTION © is able to
dialogue with any brokerage trading system, by means of DDE protocol.

Advanced School of Economics

Ca’ Foscari_University of Venice w w w . u n i v e . i t © 2008